RC_LP_U_306.1 Business Structures for Self-Employed Borrowers

Understanding the different business classifications and methods used to report income for tax purposes is key to deriving a stable monthly income figure for self-employed customers applying for mortgage loans. Sole proprietorships, partnerships, corporations, and S corporations all report taxes on forms unique to them, with equally specific guidelines, and evaluating income for underwriting purposes differs for each type of business structure.

The Business Structures for Self-Employed Borrowers course explores business structures for self-employed borrowers and examines the methods used to derive a monthly qualifying income for these individuals. The course begins with an overview of business structures and then discusses documentation requirements for self-employed borrowers. Finally, the course introduces Fannie Mae's Cash Flow Analysis (Form 1084) and provides an overview of how underwriters use this form to analyze income reported on tax returns to determine qualifying income. Please note that this course focuses on requirements for underwriting conventional loans for sale to Fannie Mae and Freddie Mac. Although these guidelines provide a good standard for underwriting practices in general, requirements for portfolio loans, government loans, and private investors will differ.

This is a single-family/residential course.